Varieties of capitalism, increasing income inequality and the sustainability of long-run growth

Mark Setterfield and Yk Kim

Cambridge Journal of Economics, 2020, vol. 44, issue 3, 559-582

Abstract: We model US household debt accumulation during the neoliberal boom (1990–2007) as a response to emulation effects and the decline of the social wage, which has ‘privatised’ an increasing share of the costs of providing for services such as health and education. The debt dynamics of the US economy are then studied under alternative assumptions about the configuration of distributional variables, which is shown to differ across varieties of capitalism that have ‘neoliberalised’ to different degrees. A key result is that distributional change alone will not make contemporary US capitalism financially sustainable due, in part, to the paradoxical nature of inequality as a spur to household borrowing, and hence a source of both demand-formation and financial fragility. Achieving sustainability requires, instead, more wide-ranging reform.

Keywords: Varieties of capitalism; Neoliberalism; Inequality; Growth; Financial fragility; Financial sustainability (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (15)

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Related works:
Working Paper: Varieties of Capitalism, Increasing Income Inequality, and the Sustainability of Long-Run Growth (2018)
Working Paper: Varieties of Capitalism, Increasing Income Inequality, and the Sustainability of Long-Run Growth (2018)
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